Most lenders offer financing programs that allow the borrower to finance up to 100% of the sales price of the new home. However, if no down payment is made, the borrower will be required to pay private mortgage insurance (PMI), (see question 10). If you can afford to put more money toward a down payment, it will reduce the amount of your monthly mortgage payments. Some loan programs offer 3% down payments if you meet certain income standards. The Veterans Adminstration (VA) and the Rural Housing Service (RHS) also offer no-down payments loans. The lender will want to know how much money you plan to put down and the source of those funds. Sources you many draw upon include savings, stocks and bonds, pension funds, real estate holdings, life insurance policies, mutual funds, and employee savings plans.
You may also use gift money from a family member that need not be repaid. If you do this, you will need to present a letter to your lender that states the amount of the gift, is signed by the giver, and is notarized by a third party. A gift letter “form” may be obtained from your lender.
You are also now allowed to withdraw up to $10,000.00 from both traditional and Roth Individual Retirement Accounts (IRAs) with no early withdrawal penalty, if used toward buying your first home.
Under some mortgage programs, such as Fannie Mae’s Community Home Buyer’s Program with the 3/2 Option, part of your down payment may come from a grant from a nonprofit housing provider in your community.